Tax Masters Accused of Fraud and Deception
State AG says 'Tax Lady', Roni Deutch should be jailed for contempt
per the court case. The “Tax Lady’ spent millions on advertising; hired people off the street with no training to work the telephones in a “sweat shop” type setting and had no intention on really helping the desperate taxpayers that contracted with her.
No sympathy here. It has been frustrating the past few years, seeing the growing number of scammers advertising their supposedly top secret and unique services for settling up past tax debts with IRS.
As anyone capable of using Google can easily see, these services take money from desperate people, do nothing to help them, and leave them even worse off with the tax agencies. Any competent professional tax advisor can help people work on arranging a payment plan or an Offer In Compromise with IRS for far less than the thousands these scam services charge. It's good to see these scammers being nailed by the authorities.
Tuesday, August 30, 2011
Monday, August 29, 2011
FEDERAL REGULATIONS MULTIPLY AT RECORD PACE
With working with small businesses, I know first-hand the impact of federal and state regulations. The regulations are there to serve a useful purpose, but sometimes enough is enough. It seems like a vicious circle. The more regulations we have, the more bureaucrats we need, and more bureaucrats sit in their office and create more regulations…which create more bureaucrats.
The U.S. Chamber of Commerce reports that the administration last week "released version 2.0 of its regulatory review, which looks back at existing regulations to determine which regulations it can streamline or eliminate." In his commentary at http://www.chamberpost.com/, the U.S. Chamber's regulatory expert, Bill Kovacs writes that while the administration is to be commended for taking the initiative, "results of this look-back will not have a material impact on the real regulatory burdens facing businesses today." In 2007, there were around 110,000 federal regulations. Today, those rules are proliferating at a rate of about 4,000 additional regulations annually. There are currently more than 22,580 pages of federal regulations on environmental protection; 15,700 pages of tax code; 10,800 pages to regulate agriculture; 6,555 pages for the transportation sector; 5,575 pages on banking regulation; and 4,955 pages of labor law. Still, the rules keep coming. According to reports, the federal agencies added $9.5 billion in new regulatory costs in July alone by proposing 229 new rules and finalizing another 379 rule changes.
The U.S. Chamber of Commerce reports that the administration last week "released version 2.0 of its regulatory review, which looks back at existing regulations to determine which regulations it can streamline or eliminate." In his commentary at http://www.chamberpost.com/, the U.S. Chamber's regulatory expert, Bill Kovacs writes that while the administration is to be commended for taking the initiative, "results of this look-back will not have a material impact on the real regulatory burdens facing businesses today." In 2007, there were around 110,000 federal regulations. Today, those rules are proliferating at a rate of about 4,000 additional regulations annually. There are currently more than 22,580 pages of federal regulations on environmental protection; 15,700 pages of tax code; 10,800 pages to regulate agriculture; 6,555 pages for the transportation sector; 5,575 pages on banking regulation; and 4,955 pages of labor law. Still, the rules keep coming. According to reports, the federal agencies added $9.5 billion in new regulatory costs in July alone by proposing 229 new rules and finalizing another 379 rule changes.
Saturday, August 27, 2011
DEBT DEAL TALK
It seems like a lot of the talk these days is about the Congressional Committee that is to come up with a deficit plan to present to Congress and the President. On top of that, the President has been saying on his bus tour that he has a plan that he is going to unveil in September. How is this going to impact income taxes? Here are my thoughts:
First of all, I don’t think that anybody thinks that the committee will offer a plan that will be passed so we will default (bad choice of words), to the 1% cutback called for in the deficit bill.
Right now, House Republicans appear to have blocked any new taxes. And all seven Republican candidates participating in the recent presidential debate pledged to oppose new taxes even if they were accompanied by ten times that amount in spending cuts. So, new taxes appear off the table for now.
But look out! The Bush tax cuts expire right after the 2012 election, and rates on ordinary income, capital gains, and qualified dividends will automatically go up unless Congress gets their act together to extend them. Democrats and Republicans are united in wanting to preserve them for "middle class" taxpayers. But the White House has pledged not to extend those cuts for single taxpayers making above $200,000 or joint filers above $250,000. If Obama wins in November, he may have the leverage to pass "enhanced revenues."
A final comment:
I love how the spin doctors in Washington use terms like "enhanced revenues" to mask new taxes. My favorite is the 3.8% "Unearned Income Medicare Contribution" imposed on investment income by last year's legislation that Washington laughingly refers to as “Healthcare Reform.” I swear, those guys have more euphemisms for "tax hikes" than Eskimos have words for snow.
First of all, I don’t think that anybody thinks that the committee will offer a plan that will be passed so we will default (bad choice of words), to the 1% cutback called for in the deficit bill.
Right now, House Republicans appear to have blocked any new taxes. And all seven Republican candidates participating in the recent presidential debate pledged to oppose new taxes even if they were accompanied by ten times that amount in spending cuts. So, new taxes appear off the table for now.
But look out! The Bush tax cuts expire right after the 2012 election, and rates on ordinary income, capital gains, and qualified dividends will automatically go up unless Congress gets their act together to extend them. Democrats and Republicans are united in wanting to preserve them for "middle class" taxpayers. But the White House has pledged not to extend those cuts for single taxpayers making above $200,000 or joint filers above $250,000. If Obama wins in November, he may have the leverage to pass "enhanced revenues."
A final comment:
I love how the spin doctors in Washington use terms like "enhanced revenues" to mask new taxes. My favorite is the 3.8% "Unearned Income Medicare Contribution" imposed on investment income by last year's legislation that Washington laughingly refers to as “Healthcare Reform.” I swear, those guys have more euphemisms for "tax hikes" than Eskimos have words for snow.
Friday, August 26, 2011
ACCOUNTANTS IN THE MOVIES
In Hollywood, accounting can seem like a pretty glamorous profession, or not.
May 17, 2011 - The Producers
Gene Wilder co-starred as accountant Leo Bloom in "The Producers," the 1968 Mel Brooks madcap comedy. Teamed with Zero Mostel (left) as Max Bialystock, the womanizing theatrical impresario, they try to create the biggest flop ever to hit Broadway, a musical tribute to Adolf Hitler. Their roles were later reprised by Matthew Broderick and Nathan Lane in a hit Broadway musical and a 2005 remake.
Gene Wilder co-starred as accountant Leo Bloom in "The Producers," the 1968 Mel Brooks madcap comedy. Teamed with Zero Mostel (left) as Max Bialystock, the womanizing theatrical impresario, they try to create the biggest flop ever to hit Broadway, a musical tribute to Adolf Hitler. Their roles were later reprised by Matthew Broderick and Nathan Lane in a hit Broadway musical and a 2005 remake.
Thursday, August 25, 2011
WHICH WAY SHOULD I GO - MARRIED FILING JOINTLY OR MARRIED FILING SEPARATELY?
Q. We have not filed our 2010 return. We are trying to decide if we should file married filing joint or married filing separately. What should we look at?
A. You really need to be working with a tax professional on this. If you are married, you generally have two choices: married filing jointly and married filing separate. In most cases, if you are married and choose to file as married filing separate, you will usually pay more tax. Usually. Some exceptions apply. But in the great majority of cases, you will pay more tax.
If you file as married filing separate, you still have to coordinate a bit with your spouse.
So why do it? There are a few scenarios where electing married filing separate status makes sense:
• Privacy. It’s rare that your spouse’s tax return will be made public but if it is, filing separately ensures that your own returns stay private. Who falls into this category? Generally, the spouses of politicians. Think Teresa Heinz-Kerry or Cindy McCain, both wealthy women in their own right who might not want the world to know their business.
• Trust (or lack thereof). These days, many married couples maintain separate accounts and have separate assets. Sometimes it’s for convenience purposes. Sometimes it’s to keep some semblance of independence. And sometimes it’s for professional reasons. That doesn’t always translate into separate tax returns. However, if you maintain separate financial lives to the point where you don’t understand/care/want to know what’s going on with your spouse’s finances, you may also not wish to file a joint tax return. You can’t simply claim ignorance if your spouse makes a significant error: the IRS expects you to review and understand your tax return before you sign it. If you don’t have a level of comfort signing a joint return, don’t. That’s a great reason to file separately.
• Protection. There’s a great line in the movie, Steel Magnolias when Truvy says to Clairee, “If you can achieve puberty, you can achieve a past.” It’s true. Many taxpayers these days marry someone with a past… past tax debts, defaulted student loans, you name it. It happens. Filing separately may preserve a spouse’s right to claim a refund (yes, you can file some extra papers to achieve the same goal but that’s an awful lot of work).
• Medical or Other Expenses. Occasionally one spouse has significant medical or other expenses but little income. Since medical expenses must meet that 7.5% floor before you can deduct them, joint filers may have a hard time meeting that threshold. However, a taxpayer filing separately with a relatively low income can hit the floor much more quickly. Ditto for miscellaneous expenses subject to the 2% floor. Keep in mind, though, that your spouse has to itemize if you do, so this only works if there are enough combined deductions between the both of you.
• Money. Sometimes, the numbers just work out better. And why pay more than you have to?
So there you go. There is no rule that says, “Thou shalt elect married filing jointly.” Sometimes it makes sense to elect married filing separate. Sometimes. Run the numbers – or discuss with your tax pro – to see if it makes sense for you.
A. You really need to be working with a tax professional on this. If you are married, you generally have two choices: married filing jointly and married filing separate. In most cases, if you are married and choose to file as married filing separate, you will usually pay more tax. Usually. Some exceptions apply. But in the great majority of cases, you will pay more tax.
If you file as married filing separate, you still have to coordinate a bit with your spouse.
• While you include only your own income, deductions, exemptions and tax credits, you still have to include your spouse’s information, including Social Security Number or Taxpayer ID.
• You also have to elect the same deduction option as your spouse: you must both opt to itemize or you must both opt to take the standard deduction. You may not each independently elect itemized or standard deductions.
So why do it? There are a few scenarios where electing married filing separate status makes sense:
• Privacy. It’s rare that your spouse’s tax return will be made public but if it is, filing separately ensures that your own returns stay private. Who falls into this category? Generally, the spouses of politicians. Think Teresa Heinz-Kerry or Cindy McCain, both wealthy women in their own right who might not want the world to know their business.
• Trust (or lack thereof). These days, many married couples maintain separate accounts and have separate assets. Sometimes it’s for convenience purposes. Sometimes it’s to keep some semblance of independence. And sometimes it’s for professional reasons. That doesn’t always translate into separate tax returns. However, if you maintain separate financial lives to the point where you don’t understand/care/want to know what’s going on with your spouse’s finances, you may also not wish to file a joint tax return. You can’t simply claim ignorance if your spouse makes a significant error: the IRS expects you to review and understand your tax return before you sign it. If you don’t have a level of comfort signing a joint return, don’t. That’s a great reason to file separately.
• Protection. There’s a great line in the movie, Steel Magnolias when Truvy says to Clairee, “If you can achieve puberty, you can achieve a past.” It’s true. Many taxpayers these days marry someone with a past… past tax debts, defaulted student loans, you name it. It happens. Filing separately may preserve a spouse’s right to claim a refund (yes, you can file some extra papers to achieve the same goal but that’s an awful lot of work).
• Medical or Other Expenses. Occasionally one spouse has significant medical or other expenses but little income. Since medical expenses must meet that 7.5% floor before you can deduct them, joint filers may have a hard time meeting that threshold. However, a taxpayer filing separately with a relatively low income can hit the floor much more quickly. Ditto for miscellaneous expenses subject to the 2% floor. Keep in mind, though, that your spouse has to itemize if you do, so this only works if there are enough combined deductions between the both of you.
• Money. Sometimes, the numbers just work out better. And why pay more than you have to?
So there you go. There is no rule that says, “Thou shalt elect married filing jointly.” Sometimes it makes sense to elect married filing separate. Sometimes. Run the numbers – or discuss with your tax pro – to see if it makes sense for you.
Wednesday, August 24, 2011
13 ESSENTIAL TALKING POINTS FOR THE EARTHQUAKE ENTHUSIAST
Since Virginia had a 5.9 magnitude earthquake and Colorado was also hit with earthquakes yesterday, I thought you might want some earthquake talking points.
1. The first recorded earthquake was in China in 1177 B.C.E.
2. China is also the birthplace of the first seismograph. Built in 132 C.E. by a man named Cheng Heng, it consisted of eight metal dragons holding eight carved balls over eight frog figurines. If an earthquake made the ground vibrate, the dragon facing the quake’s source would (naturally) drop a ball into the mouth of its corresponding frog.
3. Of course, it didn’t really work.
4. But it did look cool.
5. While dragons aren’t that good at predicting earthquakes, other animals might be. According to ancient reports, critters in the Greek city of Helice headed for the hills just before a massive quake leveled the city in 373 B.C.E.
6. There’s some modern evidence, as well. In 1975, Chinese officials evacuated Haicheng days before a massive earthquake, based both on warnings from seismologists and the strange behavior of local pets.
7. Before leaving Alabama, Shawnee leader Tecumseh told a Creek chief, “I … shall go straight to Detroit. When I arrive there, I will stamp on the ground with my foot, and shake down every house in Tuckhabatchee.” Coincidentally (or was it?), he arrived in Detroit on December 16, 1811, the day of the New Madrid earthquake—the largest ever recorded in the contiguous United States.
8. The most violent earthquake ever measured in the world hit Chile in 1960, coming in at a terrifying 9.5 on the Richter scale.
9. The atomic bomb dropped on Nagasaki, Japan, was “only” considered a 5 on the Richter scale.
10. In theory, a quake can actually measure 11, or even higher. The formula for the Richter scale has no upper limit.
11. Speaking of Charles Richter, the American scientist was supposedly an avid nudist. Rumors persist that his wife was so distressed by his penchant for hanging out in the buff that she divorced him.
12. One guy not to trust for earthquake predictions? British soldier William Bell. In 1761, right after two earthquakes uncannily hit England 28 days apart, Bell smelled opportunity. He claimed a follow-up quake would be hitting the country four weeks later. Accounts depict Bell running through the streets of London ranting about the impending destruction. Amazingly, it worked. Folks were so panicked that hundreds actually slept in boats on the Thames thinking it would be safer than their homes. Luckily, the quake never hit. But Bell quickly lost his street cred and eventually ended up in an insane asylum.
13. In early 2001, FEMA prophetically listed the three most likely disasters to hit America: a terrorist attack on New York City (check), a hurricane in New Orleans (check), and a massive earthquake in San Francisco. Nervous yet?
This article was written by Jeff Fleischer, and originally appeared in the May-June 2007 issue of Mental Floss magazine.
1. The first recorded earthquake was in China in 1177 B.C.E.
2. China is also the birthplace of the first seismograph. Built in 132 C.E. by a man named Cheng Heng, it consisted of eight metal dragons holding eight carved balls over eight frog figurines. If an earthquake made the ground vibrate, the dragon facing the quake’s source would (naturally) drop a ball into the mouth of its corresponding frog.
3. Of course, it didn’t really work.
4. But it did look cool.
5. While dragons aren’t that good at predicting earthquakes, other animals might be. According to ancient reports, critters in the Greek city of Helice headed for the hills just before a massive quake leveled the city in 373 B.C.E.
6. There’s some modern evidence, as well. In 1975, Chinese officials evacuated Haicheng days before a massive earthquake, based both on warnings from seismologists and the strange behavior of local pets.
7. Before leaving Alabama, Shawnee leader Tecumseh told a Creek chief, “I … shall go straight to Detroit. When I arrive there, I will stamp on the ground with my foot, and shake down every house in Tuckhabatchee.” Coincidentally (or was it?), he arrived in Detroit on December 16, 1811, the day of the New Madrid earthquake—the largest ever recorded in the contiguous United States.
8. The most violent earthquake ever measured in the world hit Chile in 1960, coming in at a terrifying 9.5 on the Richter scale.
9. The atomic bomb dropped on Nagasaki, Japan, was “only” considered a 5 on the Richter scale.
10. In theory, a quake can actually measure 11, or even higher. The formula for the Richter scale has no upper limit.
11. Speaking of Charles Richter, the American scientist was supposedly an avid nudist. Rumors persist that his wife was so distressed by his penchant for hanging out in the buff that she divorced him.
12. One guy not to trust for earthquake predictions? British soldier William Bell. In 1761, right after two earthquakes uncannily hit England 28 days apart, Bell smelled opportunity. He claimed a follow-up quake would be hitting the country four weeks later. Accounts depict Bell running through the streets of London ranting about the impending destruction. Amazingly, it worked. Folks were so panicked that hundreds actually slept in boats on the Thames thinking it would be safer than their homes. Luckily, the quake never hit. But Bell quickly lost his street cred and eventually ended up in an insane asylum.
13. In early 2001, FEMA prophetically listed the three most likely disasters to hit America: a terrorist attack on New York City (check), a hurricane in New Orleans (check), and a massive earthquake in San Francisco. Nervous yet?
This article was written by Jeff Fleischer, and originally appeared in the May-June 2007 issue of Mental Floss magazine.
Tuesday, August 23, 2011
AM I A WIDOW?
Q. I had a friend of the family who does tax returns file my 2010 return. My dear husband passed away in 2009. Tony, the guy that did my return, filed me as a widow. I thought that was correct. We were married for 55 wonderful years so I thought I was a widow. I was at coffee with the girls the other day and Mable one of my friends whose husband passed away at the same time said that she was told that she was not a widow and she had to file as single. I have not been able to sleep worrying about the IRS coming to get me. Who is right.
Olive
A. First of all Olive don’t worry too much. My best guess is that you are going to owe some money to the IRS and to the state but they are not going to throw you into jail or get audited. This is a good example of why someone should use a “qualified tax professional.” The key to this is that although you are a widow the actual IRS wording is “qualified widow or widower.” In order to meet that definition you must have a child that lives with you. In addition the qualification is only for two years after the death of the spouse. For the 2010 returns this would mean that the spouse died is 2008 or 2009 and you had a child living with you during those two years.
What should you do? I would recommend that you hire a qualified professional to amend your 2010 federal and, don’t forget your state return. I would also ask them to look at your 2009 return. Even though your husband died in 2009 you can still file a joint return. Make sure that a joint return was filed.
It is a pleasure serving you.
FOLLOWUP
Thank you so much. I am now sleeping better. How much would you charge to fix my problem?
Olive
I would be happy to help. Amending your federal and state returns would cost $225. This includes looking at your 2008 and 2009 returns to see if there are any other errors.
Let me know.
Olive
A. First of all Olive don’t worry too much. My best guess is that you are going to owe some money to the IRS and to the state but they are not going to throw you into jail or get audited. This is a good example of why someone should use a “qualified tax professional.” The key to this is that although you are a widow the actual IRS wording is “qualified widow or widower.” In order to meet that definition you must have a child that lives with you. In addition the qualification is only for two years after the death of the spouse. For the 2010 returns this would mean that the spouse died is 2008 or 2009 and you had a child living with you during those two years.
What should you do? I would recommend that you hire a qualified professional to amend your 2010 federal and, don’t forget your state return. I would also ask them to look at your 2009 return. Even though your husband died in 2009 you can still file a joint return. Make sure that a joint return was filed.
It is a pleasure serving you.
FOLLOWUP
Thank you so much. I am now sleeping better. How much would you charge to fix my problem?
Olive
I would be happy to help. Amending your federal and state returns would cost $225. This includes looking at your 2008 and 2009 returns to see if there are any other errors.
Let me know.
Monday, August 22, 2011
PAYING COLLEGE EXPENSES
Q. Back to school time can get really expensive! What tax breaks are there for college? I don’t understand my options. ~Terry
A.Terry, this can get a little confusing. There are several tax breaks to help pay for education. Of course, the government can’t make it simple; they have to give us several options which make it complicate the tax code.
American Opportunity Credit
• This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years – 2011 and 2012.
• The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education.
• Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
• Qualified expenses include tuition and fees, course related books, supplies and equipment.
• The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).
Lifetime Learning Credit
• In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions.
• There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.
• To qualify for the credit, your modified adjusted gross income must be below $60,000 ($120,000, if married filing jointly).
Tuition and Fees Deduction
• This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011, even if you do not itemize your deductions.
• Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000, if married filing jointly).
Student loan interest deduction
• Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year.
• It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.
Other rules
• For each student, you can choose to claim only one of the credits in a single tax year.
• If you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.
• You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit.
• You must choose to either take the credit or the deduction and should consider which is more beneficial for you.
Every situation is different, so make sure that you explore your options.
A.Terry, this can get a little confusing. There are several tax breaks to help pay for education. Of course, the government can’t make it simple; they have to give us several options which make it complicate the tax code.
American Opportunity Credit
• This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years – 2011 and 2012.
• The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education.
• Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
• Qualified expenses include tuition and fees, course related books, supplies and equipment.
• The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).
Lifetime Learning Credit
• In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions.
• There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.
• To qualify for the credit, your modified adjusted gross income must be below $60,000 ($120,000, if married filing jointly).
Tuition and Fees Deduction
• This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011, even if you do not itemize your deductions.
• Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000, if married filing jointly).
Student loan interest deduction
• Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year.
• It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.
Other rules
• For each student, you can choose to claim only one of the credits in a single tax year.
• If you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.
• You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit.
• You must choose to either take the credit or the deduction and should consider which is more beneficial for you.
Every situation is different, so make sure that you explore your options.
CELEBRITY TAX PROBLEM OF THE WEEK
RAP SINGER BEANIE SIGEL ENTERS GUILTY PLEA IN TAX CASE
Rap singer, Beanie Sigel has pleaded guilty in a Philadelphia federal court to charges of failing to file tax returns for three years in a row.
The 37-year-old performer admitted Tuesday to the government’s claim that he did not pay at least $348,000 that he owed in taxes on $1 million in income earned between 2003 and 2005, according to the Philadelphia Inquirer.
Prosecutors believe Sigel, whose real name is Dwight Grant, did not pay taxes in years prior to 2003, but the statute of limitations has run out. They contend that he owes up to $700,000 in unpaid taxes going back to the 1990s. He has previously been in prison on weapons possession charges, but was acquitted of an attempted murder charge. Sentencing in the tax case is scheduled for November. He faces up to three years in jail.
Saturday, August 20, 2011
INCOME TAX RATES AROUND THE U.S.
The Tax Foundation's Tax Policy Blog has posted a map showing the top statutory marginal income tax rate in each state for tax year 2011. To see the Tax Foundation's map, go to the link below:
http://www.taxfoundation.org/blog/show/27237.html
http://www.taxfoundation.org/blog/show/27237.html
Friday, August 19, 2011
PRESIDENT OBAMA'S TAX RETURN
Each April, the President and Vice President release their tax returns. President and Michelle Obama filed a joint return for 2010. With the Presidential salary and approximately $1.38 million in book royalties, their total income was $1.8 million.
The President created a Simplified Employee Pension account and funded that with $49,000 from his book royalties. President and Mrs. Obama's itemized deductions totaled $373,289. The majority of the itemized deductions were charitable gifts totaling $245,075.
The major charitable gift was $131,075 transferred to the Fisher House Foundation. This foundation maintains residential facilities and provides free or low-cost housing to families of veterans who are receiving treatment at VA Medical Centers.
President and Mrs. Obama also made a $10,000 gift to the Boys and Girls Club of America and a $15,000 gift to the Clinton-Bush Haiti Fund.
Vice President and Mrs. Biden also released their 2010 tax returns. Their income was from his Vice Presidential salary, the teaching appointment of Dr. Jill Biden at an area college, a pension and Social Security.
With an adjusted gross income of $379,179, their itemized deductions were $67,038. Most of the itemized deductions were taxes and mortgage interest. Their charitable gifts were $5,350.
Five separate gifts totaling $950 were transfers of clothing to Good Will. There was a $1,400 gift to the Northern Virginia Community College where Mrs. Biden is an adjunct professor of English. They also made a gift of $1,000 to Westminster Presbyterian Church.
The President created a Simplified Employee Pension account and funded that with $49,000 from his book royalties. President and Mrs. Obama's itemized deductions totaled $373,289. The majority of the itemized deductions were charitable gifts totaling $245,075.
The major charitable gift was $131,075 transferred to the Fisher House Foundation. This foundation maintains residential facilities and provides free or low-cost housing to families of veterans who are receiving treatment at VA Medical Centers.
President and Mrs. Obama also made a $10,000 gift to the Boys and Girls Club of America and a $15,000 gift to the Clinton-Bush Haiti Fund.
Vice President and Mrs. Biden also released their 2010 tax returns. Their income was from his Vice Presidential salary, the teaching appointment of Dr. Jill Biden at an area college, a pension and Social Security.
With an adjusted gross income of $379,179, their itemized deductions were $67,038. Most of the itemized deductions were taxes and mortgage interest. Their charitable gifts were $5,350.
Five separate gifts totaling $950 were transfers of clothing to Good Will. There was a $1,400 gift to the Northern Virginia Community College where Mrs. Biden is an adjunct professor of English. They also made a gift of $1,000 to Westminster Presbyterian Church.
Thursday, August 18, 2011
QUESTION ON RECORD RETENTION
Q.I understand that I have to keep records of my travel and entertainment. What actually do I need to keep?~ Twila
A.Twila, good records are important to assure that the IRS does not disallow your deductions. As I have said on several occations, “there are only three things that are important if you are audited. They are, DOCUMENTATION... DOCUMENTATION... DOCUMENTATION."
Here is a handy chart that the IRS put out that should answer your questions. Let me know if there is anything else that I can do to assist. CHART
A.Twila, good records are important to assure that the IRS does not disallow your deductions. As I have said on several occations, “there are only three things that are important if you are audited. They are, DOCUMENTATION... DOCUMENTATION... DOCUMENTATION."
Here is a handy chart that the IRS put out that should answer your questions. Let me know if there is anything else that I can do to assist. CHART
Friday, August 12, 2011
HOW THE DEFICIT IMPACTED TAXES
Unless you have been living in a cave for the last couple of weeks, you know that Congress finally took care of the debt limit...well maybe. By extending the amount that they could borrow, they are allowed to keep sending out checks and avoid defaulting on its debts. Surprise, surprise. Another extension will not be needed until after the 2012 elections. It sounds like a political move to me.
The question that you have to ask is, “How does this impact taxes?”
Lawmakers kicked taxes down the road as part of their grand compromise on the debt ceiling. Republicans wouldn’t accept proposals from Democrats to include billions of extra tax revenues in the package. That money was to come from a major revamping of the tax code; reducing deductions and tax breaks while lowering rates.
The goal of the revised system was to raise hundreds of billions in additional revenue than under the current law. Thus, Congress isn’t likely to tackle serious tax reform anytime soon.
While it is true that the debt deal established a bipartisan deficit reduction panel that could vote to approve tax increases, the chances of that happening are slim. And even if the panel were to propose a tax hike, the House probably wouldn’t pass it.
This whole mess pretty much guarantees that taxes will be a key issue in the 2012 elections. Both Democrats and Republicans remain convinced that a majority of voters will support their position on taxes. Time will tell.
The question that you have to ask is, “How does this impact taxes?”
Lawmakers kicked taxes down the road as part of their grand compromise on the debt ceiling. Republicans wouldn’t accept proposals from Democrats to include billions of extra tax revenues in the package. That money was to come from a major revamping of the tax code; reducing deductions and tax breaks while lowering rates.
The goal of the revised system was to raise hundreds of billions in additional revenue than under the current law. Thus, Congress isn’t likely to tackle serious tax reform anytime soon.
While it is true that the debt deal established a bipartisan deficit reduction panel that could vote to approve tax increases, the chances of that happening are slim. And even if the panel were to propose a tax hike, the House probably wouldn’t pass it.
This whole mess pretty much guarantees that taxes will be a key issue in the 2012 elections. Both Democrats and Republicans remain convinced that a majority of voters will support their position on taxes. Time will tell.
Thursday, August 11, 2011
CELEBRITY TAX PROBLEM OF THE WEEK
Longtime Rangel Aide Pleads Guilty to Tax Charges
James Capel, a former aide to Congressman Charles Rangel, D-N.Y., has pleaded guilty to failing to file tax returns for three years. Capel pleaded guilty to misdemeanor charges of one count of failure to file a tax return and two counts of tax fraud.
Rangel was censured in the House last December for various ethics violations, including failure to pay taxes on rental income from a villa in the Dominican Islands. Capel’s failure to file tax returns from 2007 to 2009 was unconnected to Rangel’s ethical lapses. However, he worked as a top advisor to Rangel for more than 10 years, according to The New York Times. He ran Rangel’s New York office, according to The New York Post. Rangel was the former chairman of the tax-writing House Ways and Means Committee until he stepped down in the midst of the ethics investigation.
James Capel, a former aide to Congressman Charles Rangel, D-N.Y., has pleaded guilty to failing to file tax returns for three years. Capel pleaded guilty to misdemeanor charges of one count of failure to file a tax return and two counts of tax fraud.
Rangel was censured in the House last December for various ethics violations, including failure to pay taxes on rental income from a villa in the Dominican Islands. Capel’s failure to file tax returns from 2007 to 2009 was unconnected to Rangel’s ethical lapses. However, he worked as a top advisor to Rangel for more than 10 years, according to The New York Times. He ran Rangel’s New York office, according to The New York Post. Rangel was the former chairman of the tax-writing House Ways and Means Committee until he stepped down in the midst of the ethics investigation.
Capel did have some income taxes automatically withheld from his paycheck, but his failure to file the tax returns led to about $25,000 in unpaid taxes. As part of his plea deal, he will pay over $42,000 in unpaid taxes, penalties and interest. Capel retired in February from his job, where he earned nearly $160,000 a year.
Wednesday, August 10, 2011
10 BUSINESS RULES FOR THE NEW (AND OLD) ECONOMY
Rule #1: Have a Clearly Defined Purpose
What do you stand for as an organization?
What values, credo or mission do you align with?
Yes, people do work for money, but to me, there has to be a higher meaning. A compelling WHY you do what you do?
Rule # 2: Do Everything You Do with Passion
Is your approach contagious and sustaining?
Do you drive action in your organization?
Do you hire or engage with people who bring passion to what they do?
Passion is one of those intangibles money can’t buy. Go in any Apple store and you will see associates smiling and passionate about their products. I read once: one person with passion is worth 40 people merely interested.
Rule #3: Have a Plan
What is your game plan for success?
How are you going to achieve your personal or your organizational goals?
What is your next step?
All great companies have a plan of action, be it a strategic, financial, marketing, or business plan. You have to know where you want to go in order to get there. Work your plan.
Rule # 4: Promote
How do you get your company products and services known?
How do you create a buzz or demand for what you do?
There are many ways to get yourself known. Social media is big today and the old standards of direct marketing, advertising in print, radio or TV still apply. Get yourself out there offering value. For example, write articles or provide a blog. Or maybe try the old fashioned, “doing something creative to get your name out there”. A new florist in my town had their staff standing at the local train station handing out free roses to all the ladies on Valentine’s Day. Be creative!
Rule # 5: Understand your Target Audience or Customer
How do you build a connection to your customer’s needs?
How do you demonstrate that you can solve their unique needs?
Today, it is all about the customer, building that connection, finding out what the customers unique needs are and then focusing on finding solutions that fit that need. It’s about asking great questions, analyzing what they are looking to achieve, and listening to them 100% of the time.
What do you stand for as an organization?
What values, credo or mission do you align with?
Yes, people do work for money, but to me, there has to be a higher meaning. A compelling WHY you do what you do?
Rule # 2: Do Everything You Do with Passion
Is your approach contagious and sustaining?
Do you drive action in your organization?
Do you hire or engage with people who bring passion to what they do?
Passion is one of those intangibles money can’t buy. Go in any Apple store and you will see associates smiling and passionate about their products. I read once: one person with passion is worth 40 people merely interested.
Rule #3: Have a Plan
What is your game plan for success?
How are you going to achieve your personal or your organizational goals?
What is your next step?
All great companies have a plan of action, be it a strategic, financial, marketing, or business plan. You have to know where you want to go in order to get there. Work your plan.
Rule # 4: Promote
How do you get your company products and services known?
How do you create a buzz or demand for what you do?
There are many ways to get yourself known. Social media is big today and the old standards of direct marketing, advertising in print, radio or TV still apply. Get yourself out there offering value. For example, write articles or provide a blog. Or maybe try the old fashioned, “doing something creative to get your name out there”. A new florist in my town had their staff standing at the local train station handing out free roses to all the ladies on Valentine’s Day. Be creative!
Rule # 5: Understand your Target Audience or Customer
How do you build a connection to your customer’s needs?
How do you demonstrate that you can solve their unique needs?
Today, it is all about the customer, building that connection, finding out what the customers unique needs are and then focusing on finding solutions that fit that need. It’s about asking great questions, analyzing what they are looking to achieve, and listening to them 100% of the time.
Tuesday, August 9, 2011
WONDERING ABOUT DEPRECIATION ON A USED TRUCK AND ESTATE LAWS
Q. Two questions: First, I am thinking of purchasing a used truck. How much depreciation can I take? Secondly, I have heard talk about estate laws changing in 18 months. What is the deal?
A. Regarding the truck…Does the truck weigh over 6,000 pounds? The weight of the truck makes a difference on the depreciation.
The the estate tax question is a tough one. The problem is, if the current rules are not extended, we go back to the rules 10 or so years ago, and there will be estate tax due on anything over $1 million. Currently, that number is $5 million per husband and wife and what the first to die does not use, flows over to the survivor. In essence, a couple has $10 million to work with.
Most experts feel that there is no way that the government will allow the estate tax floor to fall back to the $1 million level, but who knows. The problem is that to balance the 10-year budget, they work the estimated estate taxes in based on the lower level.
A. Regarding the truck…Does the truck weigh over 6,000 pounds? The weight of the truck makes a difference on the depreciation.
The the estate tax question is a tough one. The problem is, if the current rules are not extended, we go back to the rules 10 or so years ago, and there will be estate tax due on anything over $1 million. Currently, that number is $5 million per husband and wife and what the first to die does not use, flows over to the survivor. In essence, a couple has $10 million to work with.
Most experts feel that there is no way that the government will allow the estate tax floor to fall back to the $1 million level, but who knows. The problem is that to balance the 10-year budget, they work the estimated estate taxes in based on the lower level.
FIVE TIPS IF YOU CHANGED YOUR NAME DUE TO MARRIAGE OR DIVORCE
If you changed your name as a result of a recent marriage or divorce, you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund. Here are five tips from the IRS for taxpayers who have had a name change.
1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
3. Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change.
4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.
5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at http://www.irs.gov/, or by calling 800-TAX-FORM (800-829-3676).
1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
3. Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change.
4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.
5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at http://www.irs.gov/, or by calling 800-TAX-FORM (800-829-3676).
Sunday, August 7, 2011
CELEBRITY TAX PROBLEM OF THE WEEK
Singer R. Kelly Faces IRS Tax Lien
The Internal Revenue Service has reportedly filed a tax lien against singer, R. Kelly for $837,442.59. The IRS filed the tax lien against the Grammy-winning R&B singer-songwriter in January 2010, according to the Detroit News. Last month, however, the IRS lifted an earlier tax lien for $1,036,858.
The singer, whose full name is Robert Sylvester Kelly, is also facing a $2.9 million foreclosure lawsuit against his mansion outside Chicago, according to Crain’s. He allegedly has not made mortgage payments since June of last year. Kelly has had many hit songs including, "I Believe I Can Fly," for which he won three Grammy Awards in 1998. He has also produced and remixed songs for a number of artists, including the Isley Brothers, Luther Vandross and Vanessa Williams. However, he has also faced arrests and lawsuits for disorderly conduct, sex with underage girls, assault and other incidents.
Saturday, August 6, 2011
ADOPTING A CHILD AND WHAT TO EXPECT TAX-WISE
Q: What are the tax benefits and expenses when adopting a child?
A: There are two tax benefits available to offset the expenses of adopting a child. For 2011, you may be able to claim a refundable credit against their federal tax for up to $13,360 ($13,170 for 2010) of “qualified adoption expenses” (see below) for each adopted child. The credit is reduced (phased out) if your income exceeds certain limits (see discussion below).
Qualified adoption expenses. To qualify for the credit or the exclusion, the expenses must be “qualified adoption expenses.” These are the reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging) while away from home, and other expenses directly related to the legal adoption of an “eligible child” (defined below).
Qualified adoption expenses don't include expenses connected with the adoption of a child of a taxpayer's spouse, expenses of carrying out a surrogate parenting arrangement, expenses that violate state or federal law, or expenses paid using funds received from a federal, state, or local program. Expenses that are reimbursed by an employer don't qualify for the credit, but benefits provided by an employer under an adoption assistance program may qualify for the exclusion.
Expenses in connection with an unsuccessful attempt to adopt an eligible child before successfully finalizing the adoption of another child can qualify. Expenses connected with a foreign adoption (i.e., one in which the child isn't a U.S. citizen or resident) qualify only if the child is actually adopted.
Taxpayers who adopt a child with special needs will be deemed to have qualified adoption expenses in the tax year in which the adoption becomes final in an amount sufficient to bring their total aggregate expenses for the adoption up to $13,360 for 2011 ($13,170 for 2010). They can take the adoption credit or exclude employer-provided adoption assistance up to that amount, whether or not they had $13,360 for 2011 ($13,170 for 2010) of actual expenses.
Eligible child. An “eligible child” is a child under the age of 18 at the time the qualified adoption expense is paid. A child who turned 18 during the year is an eligible child for the part of the year he or she is under age 18. A person who is physically or mentally incapable of caring for his or her self is also eligible, regardless of age.
Special needs child. This refers to a child who the state has determined cannot or should not be returned to his parents and who can't be reasonably placed with adoptive parents without assistance because of a specific factor or condition, e.g., ethnic background, age, membership in a minority group, medical condition, or handicap. Only a child who is a citizen or resident of the U.S. can qualify as having special needs.
When to claim the credit or take the exclusion. If the qualifying expenses are paid before the year the adoption becomes final, the credit is claimed for the year after the one in which the expenses are paid. If the expenses are paid in the year the adoption becomes final or in a later year, the credit is claimed for the year in which the expenses are paid. For example, say $3,000 was paid in 2009, $2,000 in 2010, and $4,000 in 2011, when the adoption becomes final. The taxpayer claims a $3,000 credit in 2010 (for the 2009 expenses). The $2,000 of 2010 expenses and the $4,000 of 2011 expenses are combined to be claimed in 2011. In the case of a foreign adoption, the credit may not be taken until the year in which the adoption becomes final.
Adoption credit is refundable. The adoption credit is a refundable credit. So, if the sum of your refundable credits (including any adoption credit) exceeds your tax liability, the excess amount is an overpayment that can be refunded to you.
Phase out for high-income taxpayers. The credit allowable for 2011 is phased out for taxpayers with adjusted gross income (AGI) over $185,210 and is eliminated when AGI reaches $225,210. (For 2010, the phase-out begins at $182,520 and is completed at $222,520.) The 2011 credit is reduced by a percentage equal to the excess of AGI over $185,210 divided by $40,000. (For 2010, the credit is reduced by a percentage equal to the excess of AGI over $182,520 divided by $40,000). For example, say taxpayers who could otherwise claim a $2,000 credit have an AGI of $195,210 in 2011. Their $195,210 AGI minus $185,210 equals $10,000, and $10,000 divided by $40,000 is 25%. Accordingly, the taxpayers “lose” 25% of their credit ($2,000 times 25% is $500) and can only claim a credit of $1,500. (Special rules for determining AGI apply in some cases.) The phase out rules for high-AGI taxpayers apply for the exclusion as well.
Child's taxpayer identification number required for credit or exclusion. The IRS can disallow the credit and the exclusion if a valid taxpayer identification number (TIN) for the child if not included on the return.
Adopted child may qualify for dependency deduction, other tax benefits. Your legally adopted child will qualify as your dependent if the other dependency tests are met, e.g., you provide more than half of the child's support. Even if the adoption isn't yet final, the child will be your dependent if he or she was placed with you for legal adoption by an authorized placement agency and was a member of your household for at least part of the year. Special requirements apply to adoptions of foreign children who aren't U.S. citizens or residents. Once the child is your dependent, you will qualify for the dependency deduction and for other tax benefits, such as the child tax credit.
I can help you to make sure that you get the full benefit of the substantial tax savings available to adoptive parents.
Larry Kopsa, CPA
A: There are two tax benefits available to offset the expenses of adopting a child. For 2011, you may be able to claim a refundable credit against their federal tax for up to $13,360 ($13,170 for 2010) of “qualified adoption expenses” (see below) for each adopted child. The credit is reduced (phased out) if your income exceeds certain limits (see discussion below).
Qualified adoption expenses. To qualify for the credit or the exclusion, the expenses must be “qualified adoption expenses.” These are the reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging) while away from home, and other expenses directly related to the legal adoption of an “eligible child” (defined below).
Qualified adoption expenses don't include expenses connected with the adoption of a child of a taxpayer's spouse, expenses of carrying out a surrogate parenting arrangement, expenses that violate state or federal law, or expenses paid using funds received from a federal, state, or local program. Expenses that are reimbursed by an employer don't qualify for the credit, but benefits provided by an employer under an adoption assistance program may qualify for the exclusion.
Expenses in connection with an unsuccessful attempt to adopt an eligible child before successfully finalizing the adoption of another child can qualify. Expenses connected with a foreign adoption (i.e., one in which the child isn't a U.S. citizen or resident) qualify only if the child is actually adopted.
Taxpayers who adopt a child with special needs will be deemed to have qualified adoption expenses in the tax year in which the adoption becomes final in an amount sufficient to bring their total aggregate expenses for the adoption up to $13,360 for 2011 ($13,170 for 2010). They can take the adoption credit or exclude employer-provided adoption assistance up to that amount, whether or not they had $13,360 for 2011 ($13,170 for 2010) of actual expenses.
Eligible child. An “eligible child” is a child under the age of 18 at the time the qualified adoption expense is paid. A child who turned 18 during the year is an eligible child for the part of the year he or she is under age 18. A person who is physically or mentally incapable of caring for his or her self is also eligible, regardless of age.
Special needs child. This refers to a child who the state has determined cannot or should not be returned to his parents and who can't be reasonably placed with adoptive parents without assistance because of a specific factor or condition, e.g., ethnic background, age, membership in a minority group, medical condition, or handicap. Only a child who is a citizen or resident of the U.S. can qualify as having special needs.
When to claim the credit or take the exclusion. If the qualifying expenses are paid before the year the adoption becomes final, the credit is claimed for the year after the one in which the expenses are paid. If the expenses are paid in the year the adoption becomes final or in a later year, the credit is claimed for the year in which the expenses are paid. For example, say $3,000 was paid in 2009, $2,000 in 2010, and $4,000 in 2011, when the adoption becomes final. The taxpayer claims a $3,000 credit in 2010 (for the 2009 expenses). The $2,000 of 2010 expenses and the $4,000 of 2011 expenses are combined to be claimed in 2011. In the case of a foreign adoption, the credit may not be taken until the year in which the adoption becomes final.
Adoption credit is refundable. The adoption credit is a refundable credit. So, if the sum of your refundable credits (including any adoption credit) exceeds your tax liability, the excess amount is an overpayment that can be refunded to you.
Phase out for high-income taxpayers. The credit allowable for 2011 is phased out for taxpayers with adjusted gross income (AGI) over $185,210 and is eliminated when AGI reaches $225,210. (For 2010, the phase-out begins at $182,520 and is completed at $222,520.) The 2011 credit is reduced by a percentage equal to the excess of AGI over $185,210 divided by $40,000. (For 2010, the credit is reduced by a percentage equal to the excess of AGI over $182,520 divided by $40,000). For example, say taxpayers who could otherwise claim a $2,000 credit have an AGI of $195,210 in 2011. Their $195,210 AGI minus $185,210 equals $10,000, and $10,000 divided by $40,000 is 25%. Accordingly, the taxpayers “lose” 25% of their credit ($2,000 times 25% is $500) and can only claim a credit of $1,500. (Special rules for determining AGI apply in some cases.) The phase out rules for high-AGI taxpayers apply for the exclusion as well.
Child's taxpayer identification number required for credit or exclusion. The IRS can disallow the credit and the exclusion if a valid taxpayer identification number (TIN) for the child if not included on the return.
Adopted child may qualify for dependency deduction, other tax benefits. Your legally adopted child will qualify as your dependent if the other dependency tests are met, e.g., you provide more than half of the child's support. Even if the adoption isn't yet final, the child will be your dependent if he or she was placed with you for legal adoption by an authorized placement agency and was a member of your household for at least part of the year. Special requirements apply to adoptions of foreign children who aren't U.S. citizens or residents. Once the child is your dependent, you will qualify for the dependency deduction and for other tax benefits, such as the child tax credit.
I can help you to make sure that you get the full benefit of the substantial tax savings available to adoptive parents.
Larry Kopsa, CPA
Thursday, August 4, 2011
A DUMB LAWSUIT
And Here’s the Kicker~ On her way home from having dinner and drinks, Melanie from Chicago got angry with her husband and tried to kick him. Instead, she crashed through the window of a beauty salon, suffering several deep cuts. So naturally, she sued the salon. Part of her argument: The store’s plate glass window, which fronts a sidewalk, “frequently traveled by intoxicated pedestrians,” should have been stronger.
Source: wbbm780.com(Chicago)
Wednesday, August 3, 2011
BUSINESS TRIP DEDUCTIONS
Q. I am headed out of town for work. Can I deduct my trip?? Thanks for your help. ~ Amber
A. The actual costs of travel (e.g., plane fare, cab to airport, etc.) are deductible for out-of-town business trips. You are also allowed to deduct the cost of meals and lodging. Your meals are deductible even if they are “personal,” i.e., not connected with business, although, as with all deductible meals, only 50% of the cost is allowed (80% for long-haul truckers, certain airline, train and bus employees, and certain merchant mariners). Additionally, no deduction is allowed for meal or lodging expenses that are “lavish or extravagant,” a term that has been interpreted to mean “unreasonable.”
Personal entertainment costs on the trip aren't deductible, but business-related costs such as for dry-cleaning, phone calls, and computer rentals are.
Some allocations may be required if the trip is a combined business/pleasure trip, for example, if you fly to a location for five days of business meetings and stay on for an additional period of vacation. Only the cost of meals, lodging, etc., for the business days are deductible—not for the personal vacation days.
On the other hand, with respect to the cost of the travel itself (plane fare, etc.), if the trip is “primarily” business, the travel cost can be deducted in its entirety and no allocation is required. Conversely, if the trip is primarily personal, none of the travel costs are deductible. An important factor in determining if the trip is primarily business or personal is the amount of time spent on each, although this isn't the sole factor.
If the trip doesn't involve the actual conduct of business, but is for the purpose of attending a convention, seminar, etc., IRS checks the nature of the meetings carefully to make sure they are not vacations in disguise. Be careful to save all material helpful in establishing the business or professional nature of this travel.
The rules on deducting the costs for your spouse if she accompanies you on a business trip are very restrictive. No deduction is allowed unless she's an employee of yours or your company and her travel is also for a business purpose.
Finally, note that personal expenses you incur at home as a result of taking the trip aren't deductible. For example, the cost of boarding a pet while you're away isn't deductible.
A. The actual costs of travel (e.g., plane fare, cab to airport, etc.) are deductible for out-of-town business trips. You are also allowed to deduct the cost of meals and lodging. Your meals are deductible even if they are “personal,” i.e., not connected with business, although, as with all deductible meals, only 50% of the cost is allowed (80% for long-haul truckers, certain airline, train and bus employees, and certain merchant mariners). Additionally, no deduction is allowed for meal or lodging expenses that are “lavish or extravagant,” a term that has been interpreted to mean “unreasonable.”
Personal entertainment costs on the trip aren't deductible, but business-related costs such as for dry-cleaning, phone calls, and computer rentals are.
Some allocations may be required if the trip is a combined business/pleasure trip, for example, if you fly to a location for five days of business meetings and stay on for an additional period of vacation. Only the cost of meals, lodging, etc., for the business days are deductible—not for the personal vacation days.
On the other hand, with respect to the cost of the travel itself (plane fare, etc.), if the trip is “primarily” business, the travel cost can be deducted in its entirety and no allocation is required. Conversely, if the trip is primarily personal, none of the travel costs are deductible. An important factor in determining if the trip is primarily business or personal is the amount of time spent on each, although this isn't the sole factor.
If the trip doesn't involve the actual conduct of business, but is for the purpose of attending a convention, seminar, etc., IRS checks the nature of the meetings carefully to make sure they are not vacations in disguise. Be careful to save all material helpful in establishing the business or professional nature of this travel.
The rules on deducting the costs for your spouse if she accompanies you on a business trip are very restrictive. No deduction is allowed unless she's an employee of yours or your company and her travel is also for a business purpose.
Finally, note that personal expenses you incur at home as a result of taking the trip aren't deductible. For example, the cost of boarding a pet while you're away isn't deductible.
Have fun on your trip!
Tuesday, August 2, 2011
RETURNING JETER'S BIG HIT: NO GOOD DEED GOES UNTAXED (PERHAPS)
From the New York Times.
Here is the fan’s fantasy: You go to the ballpark and under a picture-perfect sky not only do the Yankees win, but in recognition of your exemplary behavior, the team also showers you with free season tickets, signed merchandise and a personal audience with the Yankee-est of Yankees, Derek Jeter. The team president hands you his card, with his e-mail address. And here is the reality: The taxman may own a piece of your windfall. And not in tickets, either. He takes only cash.
For Christian Lopez, the 23-year-old fan who came up with Jeter’s 3,000th hit at Yankee Stadium on Saturday, the ramifications of his gift from above are as American as baseball, hot dogs and taxes.
“There’s different ways the I.R.S. could try to characterize a ball caught by a fan in the stands,” said Andrew D. Appleby, a tax associate at the Sutherland Asbill & Brennan law firm in New York who has written about the tax implications of souvenir baseballs. “But when the Yankees give him all those things, it’s much more clear-cut that he owes taxes on what they give him.”
Mr. Lopez, of Highland Mills, N.Y., was seated with his father, Raul, in the left field stands when Jeter drove a 3-2 curveball over the wall. The ball bounced off Raul Lopez’s hands and rolled to the floor, where his son, a former defensive tackle in college, pounced on it. The blast made Jeter only the 28th player to have 3,000 hits, and the first to do so as a Yankee.
Stadium security guards, who had been prepared for the event, whisked Mr. Lopez and his father to the office of the team president, Randy Levine, where officials asked his intentions, according to a team spokeswoman. “He goes, ‘What do you want?’ ” Mr. Lopez said Monday at a Verizon store in Middletown, N.Y., where he works in customer service. “I was like, ‘How about a couple signed balls, some jerseys and bats.’ He said, ‘O.K., I can definitely do that.’ ”
In lieu of such price-setting, the Yankees gave Mr. Lopez four Champions Suite tickets for their remaining home games and any postseason games, along with three bats, three balls and two jerseys, all signed by Jeter. For Sunday’s game the team gave him four front-row Legends seats, which sell for up to $1,358.90 each.
“Pretty clearly he’s going to have to report as income the value of all the stuff he got for the ball,” Professor Caron said. So break out your pencils. On SportsMemorabilia.com, an auction site, baseballs signed by Jeter were being sold for up to $600, jerseys for close to $1,000 and bats for $900.
The tickets to the 32 remaining home games (after Sunday) have a combined face value of $44,800 to $73,600, according to the team’s Web site. The tickets could be worth a lot more if the Yankees play deep into October. Steven Bandini, a tax partner at the accounting firm Zapken & Loeb, said that if the items were valued modestly at $50,000, they would probably carry a tax burden of about $14,000.
“The legal question of whether it is a gift or prize is whether the transferor is giving the property out of detached and disinterested generosity,” Professor Graetz said. “It’s hard for me, not being a Yankee fan, to think of the Yankees as being in the business of exercising generosity to others, but there’s a reasonable case to be made that these were given out of generosity.”
Mr. Lopez said if he had to pay taxes, he hoped he could borrow from his parents rather than sell his memorabilia. He did, however, plan to give a bat and a jersey to his girlfriend, he said. “She’s the one who bought the tickets,” he said. “Jeter said I quote-unquote owe her a lot. I’m going to take his words as advice.”
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